4. GENERAL CONTEXT INDICATORS 1. Household income

life. Household income is adjusted for family size and the Definition and measurement adjusted measure is attributed to every person in that household. Half of all people have higher and half lower Data on annual equivalised household dis- income than the median. posable income came from the In 2007 half the people in and had house- project (OECD, 2008). Disposable income was gross hold incomes less than USD 5 000. Half the people in household income after deduction of direct taxes and had incomes about seven times higher payment of social security contributions. It excluded (GE1.1). Low household income countries included those in-kind services provided to households by govern- in Southern Europe and the Mediterranean and much ments and private entities, consumption taxes, and of Eastern Europe, as well as the two Latin American imputed income flows due to home ownership. countries – and Mexico. Higher household income People were attributed the income of their household. countries included and the . Country Household income was adjusted for household size income rankings using equivalised household income were by assuming a common equivalence scale of 0.5. similar to those calculated using per capita net national In previous editions, net national income (NNI) per income (NNI). However, using a household rather than an capita was used as the income measure. Following NNI measure changed country income rankings consi- recommendations of the Stiglitz-Sen-Fitoussi derably for some countries. fell seven places and commission, the income measure in Society at a Glance and Korea rose by five places. changes in 2011 to a household-based one. Median Household income growth between the mid-1980s household income is conceptually stronger for social and 2007 averaged about 1.5% across the OECD (GE1.2). By purposes. It more closely relates to family income than way of comparison, per capita NNI per capita. In addition, median household income (GDP) growth was more than half a per cent higher, and NNI creates a link with the poverty data (see EQ1 and EQ2), growth was higher by a similar amount. Such differences which uses the median household income data in its can cumulate considerably over a generation. OECD aver- calculation. Data was provided to the OECD by national age growth also hides huge country variations. Mexico, consultants and was based on common methods and and were countries where household definitions applied to national micro data. While this income growth was equal to or higher than conventional approach improves cross-country comparability, national aggregates. Household income growth was espe- national data sets still differ from one another in ways cially low relative to national aggregates in , Chile, not readily standardised. In some countries, median Luxembourg, , and . Reasons for differences income come from different data sources over time, between household and aggregate production growth and this adds further data error. It is likely that house- measures could be due to the household focus, rather than hold income measures, while conceptually stronger of the nation as a whole, the focus on , rather than for social purposes, have a lower degree of inter- averages, the different methods of adjusting for numbers of national comparability than the national income people, or measurement errors in the statistics. aggregates. To reflect this imprecision, household income figures were rounded to the nearest USD 1 000. For cross-country comparison, national currency mea- Further reading sures of income were converted into the United States OECD (2008), Growing Unequal? Income Distribution and Poverty dollars (USD) using exchange in OECD Countries, OECD Publishing, Paris. rates (PPPs). These PPPs reflect the amount of a national currency required in each country to buy the Stiglitz, J., A. Sen and J.P. Fitoussi (2009), “Report by the same basket of goods and services as a dollar does in Commission on the Measurement of Economic Perfor- the United States. Both income and PPP estimates are mance and Social Progress”, www.stiglitz-sen-fitoussi.fr/ affected by statistical errors, so differences between documents/rapport_anglais.pdf. countries of 5% or less are not considered significant. Figure note

Figure GE1.1, Panel B: changes over a 10-20-year period are After subtracting taxes and adding welfare benefits not available for , , Korea, , the Slovak Republic, household income provides an indication of the goods and . Changes are available from mid-1990s for and services families can purchase on the market. It is , Chile, and Portugal. thus an absolute objective indication of material quality of Information on data for Israel: http://dx.doi.org/10.1787/888932315602.

42 SOCIETY AT A GLANCE 2011: OECD SOCIAL INDICATORS © OECD 2011 4. GENERAL CONTEXT INDICATORS

1. Household income

GE1.1. Median equivalised income of OECD countries varies between USD 5 000 and 34 000 Panel A. Annual median equivalised disposable household income Panel B. Real average annual growth in real median in USD at current prices and current PPPs in 2007 household income, between mid-80s (or mid-90s) (, rounded at nearest 1 000) and late-2000s (or mid-2000s), percentages

34 000 Luxembourg 2.1 31 000 United States 1.0 31 000 Norway 2.2 28 000 Iceland 27 000 Australia 3.3 27 000 Switzerland 25 000 0.8 25 000 2.1 25 000 Ireland 5.5 24 000 1.5 24 000 1.5 23 000 Sweden 1.7 22 000 0.9 22 000 Belgium 0.6 21 000 0.7 21 000 1.6 21 000 New Zealand 1.2 20 000 0.9 19 000 Japan 0.3 19 000 OECD 1.7 19 000 Korea 19 000 Slovenia 18 000 Spain 4.0 17 000 0.7 16 000 1.9 14 000 Israel 1.6 13 000 1.7 13 000 Portugal 4.2 10 000 Estonia 9 000 Poland 9 000 Slovak Republic 9 000 Hungary 0.6 8 000 Chile 2.4 6 000 Turkey 0.8 5 000 Mexico 1.2 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 0 1 2 3 4 5 6

GE1.2. Household income grows slower than measures of material well-being Real annual average growth in median household equivalised income, NNI per capita and GDP per capita, between mid-1980s (or mid-1990s) and late-2000s (or mid-1990s), in percentages

Median equivalised household income () Net national income per capita Gross domestic product per capita 7

6

5

4

3

2

1

0 s s k y y d n g n d ia d d ce r n m r n n gal alia ur blic ael n tr n n n ada u tu pai tr Chile rway eece u sr la tate a ma n Italy ga rela r S gdom r OECD I n us rla r n rma Japa I us No n G wede Fi A Mexico F Ca un Po A S De Ge Belgi H xembo ited S u n ited Ki L Nethe New Zeala n U U Czech Rep

Source: OECD Database on Income Distribution and Poverty (www..org/els/social/inequality) and OECD National Accounts Database (www.oecd.org/statistics/ nationalaccounts). 1 2 http://dx.doi.org/10.1787/888932381684

SOCIETY AT A GLANCE 2011: OECD SOCIAL INDICATORS © OECD 2011 43 From: Society at a Glance 2011 OECD Social Indicators

Access the complete publication at: https://doi.org/10.1787/soc_glance-2011-en

Please cite this chapter as:

OECD (2011), “Household income”, in Society at a Glance 2011: OECD Social Indicators, OECD Publishing, Paris.

DOI: https://doi.org/10.1787/soc_glance-2011-6-en

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